Payments and Billing on a Building Project

October 14th, 2022 | 6 min. read

When planning a building project, knowing how you pay is as important as knowing what you pay. An understanding of billing for architectural services and construction work helps you allocate funds and budget accordingly.

Due to the long and complex nature of building projects, architects and contractors use unique billing methods. Rather than charge a lump sum, architects and contractors tend to divide payments into percentages based on project stages and completed work.

We understand billing can be confusing—especially for those taking on their first project. To set expectations, this article will discuss common billing methods for architects and contractors.

Billing for Architectural Services

Architects often divide fees into two categories: basic and supplemental services. Although basic services can be charged hourly, architects often base their fee on a percentage of the construction. For example, a typical basic service fee can range from 8-15% of the construction cost depending on the size and complexity of the project.

For billing, the total fee is broken into percentages based on each project phase. We charge as follows:

These percentages are then broken into monthly payments based on the amount of completed work. For example, if you complete 15% of Schematic Design in a month, the invoice will reflect 15% of 20% of the total fee.

Supplemental services appear as an additional line item and may be charged at an hourly rate, a flat rate, or as a percentage of the construction cost. Like basic services, billing for supplemental services reflects monthly progress.

Adjusted Cost Estimates

Throughout the design process, construction cost estimates will likely fluctuate. Changes to the estimate will affect billing if your architect bases their fee on a construction cost percentage.

For example, an architect could charge an 10% fee for a project with an estimated $5 million constriction cost. If the client wants to decrease the square footage during Schematic Design, the construction cost may drop to $4.5 million.

Invoices in Design Development will reflect a $4.5 million construction cost rather than the original $5 million. The concept also applies to budget increases. If the client decides to increase the square footage, future billings will reflect the increased construction cost.

Billing for Construction Work

The final portion of an architectural fee is paid during construction. These payments are stretched out over the entire construction period, making them smaller than design payments.

Unless you choose a design-build project delivery method, you will receive separate invoices from your architect and contractor. Design-build projects place the architect and contractor under the same contract, resulting in one invoice.

Contractor invoices will reflect work completed within the last month and the number of materials purchased and stored on-site. Payment requests will break down completed work by divisions of labor.

For example, if subcontractors complete 50% of the concrete work within a month, your payment will reflect this amount. Your architect will visit the site periodically to verify the completed work matches the requested payout.

Release of Lien

Construction contracts often involve liens (also known as “mechanic’s liens”) to ensure subcontractors are paid correctly.

A lien gives subcontractors a claim against the property as a form of security in case they are not paid. After receiving the contractor’s payment, the subcontractor will file a lien release.

Your architect will collect lien releases before certifying the next month’s payment to verify no liens are placed against your property.

Learn More About Building Project Costs

Billing may not be the most exciting part of a building project, but it’s at the top of everyone’s minds. That’s why we address it head-on and transparently set expectations.

If your architect charges a percentage fee for basic services, expect them to divide payments by design phases and adjust billing alongside construction cost estimates. Supplemental services will appear as an additional line item.

Likewise, your contractor will base billing on divisions of labor and purchased materials. You will receive a monthly payment request reflecting the amount of completed work.

Throughout construction, your architect will visit the site, review payment requests, and facilitate communication. They will also track any changes to the contract documents. Learn more by reading about construction change orders.